Option traders appear to be setting up for a bullish move on Patterson-UTI Energy Inc. (PTEN). Traders plowed into 3,378 new call option contracts -- 10.21 times the average volume -- on the stock on Tuesday. And we know that traders were eager to get into this trade because 94% of the trades came in on the ask price.

Patterson-UTI faces resistance just below $17. The stock closed Tuesday at $16.19, up 9.42% during the past month.

Option traders also look like they are preparing for a bearish move on iShares iBoxx $ Invest Grade Corp Bond (LQD). Traders bought 10,043.00 new put option contracts -- 7.92 times the average volume -- on the stock. A full 100% of these trades also came in on the ask price.

The stock closed Tuesday at $111.52, up 1.09% during the past month.

Options traders appear to be setting up for a bullish move on Host Hotels & Resorts Inc. (HST). Traders plowed into 2,416 new call option contracts -- 5.39 times the average volume -- on the stock on Tuesday. And we know that traders were eager to get into this trade because 96% of the trades came in on the ask price.

Host Hotels has been consolidating in what looks like a bullish pennant for the past few months. The stock closed Tuesday at $13.97, down 3.85% during the past month.

Option traders also look like they are preparing for a bearish move on Leucadia National Corp. (LUK). Traders bought 1,504.00 new put option contracts -- 5.88 times the average volume -- on the stock. A full 100% of these trades also came in on the ask price.

The stock closed Tuesday at $22.69, up 5% during the past month.

"Tread lightly," cautions leading fund expert Bill Donoghue. In his Marketwatch Proactive Fund Investor, which develops various actively-managed mutual funds portfolios, "Further market erosion is more likely than a rally. There's little reason for optimism."

"When trends become highly probable and highly correlated with portfolio holdings, our advice may become very profitable. This is one of those times.

"The Dow Jones Industrial Average is about to take out its 2002 low and safe-harbor investors are shifting to precious metals. Technically the next support is 25% down at 6,000.

"Considering the chronic financial damage done to the global economy, the bottom could even be lower. Even if you are a perennial optimist, you have to entertain and prepare for the possibility that the safest investment is to expect a continuing market downturn.

Arguably, many of the factors that influence the relationship between high yield -- often referred to as "junk" -- bonds and investment grade bonds, including economic fundamentals and investor attitudes towards risk, also affect share prices.

The more exuberant investors are, for example, the more likely they are to favor lending money to risky borrowers or shifting funds from money market accounts or fixed-income securities into equities -- and vice versa.